Bank of England Leaves Policy Measures Unchanged, GBP/USD Picks Up a Bid

BANK OF ENGLAND (BOE) LATEST AND GBP/USD PRICE, CHART AND ANALYSIS:

• The Bank of England warns that UK unemployment may rise to 7.5%.
• UK central bank sees a recovery in household consumption.

The Bank of England (BoE) left all policy measures unchanged today, in line with market expectations, and warned that Q2 GDP is likely to be over 20% lower than Q4 2019. While the expected hit to Q2 GDP is worryingly large, the monetary policy committee added that data suggested that spending has recovered significantly since April and that household consumption in July was less than 10% below its level at the start of the year. In the near term, unemployment is projected to jump to 7.5%. The MPC also added that it would continue to review the appropriateness of a negative policy rate as a tool alongside its broader toolkit. 

GBP/USD picked-up after the central bank announcement and touched a new multi-month high of 1.3181 before drifting lower. The even-handed nature of today’s release pushed back any thoughts of negative interest rates in the short-term but also left the door open for further stimulus measures if needed. The pair now eye 1.3200 and potentially higher although the move will be also based on how the currently weak US dollar behaves after Friday’s US Labor Report.

GBP/USD DAILY PRICE CHART (DECEMBER 2019 – AUGUST 6, 2020)

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